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[EL PASO ENERGY LOGO]

POLICY SUBJECT:   RELOCATION FOR EMPLOYEES RELOCATING FROM
                  EL PASO, TEXAS TO HOUSTON, TEXAS, AS A RESULT
                  OF RELOCATING THE CORPORATE OFFICE

EFFECTIVE:   NOVEMBER 1, 1996

     I.  POLICY

         When a regular full-time employee is requested to transfer to Houston,
         Texas, in 1996 or within the first six months of 1997, as a result of
         the relocation of El Paso Energy Corporation's headquarters from El
         Paso, Texas, to Houston, the employee will be reimbursed for certain
         relocation expenses. The employee is to exercise prudence in any
         relocation transaction to ensure that reimbursable costs are minimized.

         The company has contracted with Prudential Relocation to provide
         relocation assistance for employees.

     II. GENERAL PROVISIONS

         o     Transfer must be made at request of the company.

         o     A Transfer must meet IRS regulations specifying that the move
               must be over 50 miles and employee must work full time in the
               general area of the new work location for at least 39 weeks
               during the 12 months immediately following the move.

         o     One set of benefits per household.

         o     Covers employee and all persons residing permanently in
               employee's household when transfer request is made.

    III. GENERAL PROVISIONS

         A.    LUMP SUM PAYMENTS

               1.  INCIDENTAL ALLOWANCE

                   The company will provide an incidental allowance equal to 10
                   percent of his or her annual post-move base salary, grossed
                   up for taxes. The incidental allowance is to be used for
                   expenses not covered elsewhere in this policy. Examples of
                   items which are considered incidental expenses include, but
                   are not limited to, deposits for utilities, deposits for
                   renting and leasing, movement of possessions not covered by
                   this policy (Item III, Section B), cleaning/painting/repairs
                   of new residence, dependent care, equity in new


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                   residence, upgrade of fixtures and appliances, landscaping,
                   movement of a mobile home that is not the primary residence,
                   babysitting and boarding of pets necessitated by the
                   relocation, drivers license, automobile registration,
                   forfeited membership fees, housecleaning and any expenses
                   related to establishing a residence at the new location not
                   covered by the homefinding allowance. Prudential will issue
                   this payment.

               2.  HOMEFINDING ALLOWANCE

                   The company will provide a lump sum payment, grossed up for
                   taxes, for the purpose of establishing a residence at the new
                   location. The payment is based on one-half of the cost of an
                   8-day, 7-night trip for the employee and one household member
                   to the new location, including round-trip coach airfare,
                   accommodations at a moderately priced hotel, car rental and
                   meals. Prudential will issue this payment.

               3.  TEMPORARY LIVING ALLOWANCE

                   The company will provide a lump sum payment, grossed up for
                   taxes, equal to 3 percent of their annual post-move base
                   salary (a minimum of $1,500) for temporary living expenses
                   for the employee. The Prudential counselor can help make
                   temporary housing arrangements. The employee should call the
                   Prudential counselor and discuss temporary living
                   requirements.

         B.    MOVEMENT OF HOUSEHOLD GOODS AND STORAGE

               Prudential Relocation will arrange for packing, transporting, and
               unpacking of furniture and normal household effects and the costs
               will be paid directly by the company. The Prudential counselor
               will work directly with the employee to arrange for the movement
               of household effects. Prudential can make arrangements to ship up
               to two cars.

               The following and similar items will not be moved at the
               company's expense:

               o    recreational motor vehicles

               o    boats, tractors (too large for regular shipment along with
                    household goods)

               o    more than two vehicles, i.e., personal automobiles and
                    motorcycles

               o    patio slate, rocks, shrubbery, firewood, etc.

               o    lumber or other building material such as cement, gravel,
                    sand, bricks, etc.

               o    frozen food

               o    pets

               o    plants

               Coverage through Prudential includes the purchase of full
               replacement cost insurance of up to $150,000. The employee is
               responsible for declaring the actual value of the household goods
               for the full replacement coverage. Full




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               replacement cost coverage for any declaration of actual value
               which exceeds $150,000 must have special approval by the
               Executive Vice President, Human Resources and Administration.
               Charges for full replacement cost coverage will be paid by the
               company. In the event of damage to any property, the Prudential
               counselor will assist in processing insurance claims to
               facilitate timely resolution of disputes.

               Prudential will arrange for the storage of household goods for a
               period of 60 days if it is not feasible to immediately move them
               into a newly acquired residence at the new location. Only those
               items on the original bill of lading will be stored at company
               expense. The storage expenses will be paid directly by the
               company.

               In lieu of company arranged movement of household goods, an
               employee is eligible for a lump sum payment of $750, not grossed
               up for taxes, to move his/her household goods. The employee will
               be responsible for obtaining insurance associated with the move.

               The expense of moving a mobile home, when it is in moveable
               condition and if the employee does not own the land on which it
               is situated, is covered if it is the primary residence. Movement
               of household goods will also be covered, but only when such items
               cannot be moved within the mobile home. Normal covered costs
               include tow truck charges, removal and reinstallation of fences,
               skirting and porches, utilities connection, lease penalty up to
               three months, insurance and applicable state and local fees to
               transport and reinstallation of safety devices. If the employee
               owns the land, the company will not cover the cost of moving the
               mobile home. It will be covered under the provisions of the home
               sale program in Section III, paragraph D2.

         C.    TRAVEL TO NEW LOCATION

               The company will reimburse the costs associated with moving the
               employee and all permanent members of the household to the new
               location. The following expenses will be reimbursed or arranged:

               o    If the employee elects to drive to the new location, mileage
                    at current IRS rate for up to two cars;

               o    Cost of one-way coach airfare for employee and all persons
                    residing permanently in the household;

               o    Moderate hotel lodging, not to exceed two nights, and
                    reasonable meals not to exceed $25 per person per day for
                    three days.



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         D.    HOME SALE PROGRAM

               An employee who owns his/her primary residence is eligible for
               home sale benefits offered by Prudential Relocation. The employee
               must contact his/her Prudential counselor to ensure the maximum
               benefits are obtained.

               1.   INELIGIBLE PROPERTIES - The following properties are
                    considered ineligible properties and therefore will not be
                    eligible for reimbursement of costs associated with sale or
                    purchase of such properties:

                    o    Farms, ranches, orchards, summer homes, duplexes or any
                         multiple unit properties 

                    o    Cooperative apartments 

                    o    Any property with excess acreage for the area 

                    o    Any property with over 5 acres 

                    o    Any residence that contains hazardous or toxic
                         substances or is near hazardous or toxic substances
 
                    o    Non-residential use property, either partial or whole
                         use 

                    o    Any property with no access/no easement 

                    o    Properties without marketable title (i.e., landlocked
                         properties and properties with a cloud on the title)
 
                    o    Any properties that have repairs that are more than 10
                         percent of the appraised value 

                    o    Mobile homes - see Item III, Section D #2

                    All properties must be in marketable condition with no major
                    repairs, structural or code problems which have not been
                    repaired or deducted from equity.

               2.   MOBILE HOMES - In lieu of purchasing mobile homes, the
                    company will make a lump sum payment to the employee,
                    grossed up for taxes, if the mobile home meets the following
                    criteria:

                    o    it is the primary residence 

                    o    it is permanently affixed 

                    o    it meets state requirements 

                    o    it is on property (land) owned by the employee

                    The lump sum will be based on the average of one appraisal
                    and one broker's price opinion (must be within 5 percent of
                    each other) times 8 percent.

                    Mobile homes of a moveable nature and reasonable distance
                    are addressed in this policy under Item III, Section B. If
                    the mobile home is moved, the employee is not eligible for a
                    lump sum payment.



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               3.   GUARANTEED OFFER AND HOME MARKETING ASSISTANCE - Employees
                    are encouraged to list their home with a qualified broker
                    and to actively participate in the marketing of the home.
                    The Prudential counselor can assist the employee in the
                    selection of a qualified broker to help maximize marketing
                    efforts. It is recommended that an employee speak to the
                    Prudential counselor before signing any documents with
                    realtors/agents. Any commission that is not considered
                    normal for the area will not be reimbursed by the company.

                    The employee must market their home for at least 60 days and
                    the list price cannot be more than 110 percent of the
                    appraised price in order to be eligible for the Loss
                    Protection on Sale of Home and the Home Sale Program. When
                    listing a home, the employee must include the following
                    exclusion clause to be eligible for the guaranteed offer 
                    and/or the amended sale benefits:

                    "It is understood and agreed that regardless of whether or
                    not an offer is presented by a ready, willing, and able
                    buyer:

                    1.   No commission or compensation shall be earned by, or
                         due and payable to broker until the sale of the
                         property has been consummated between seller and buyer,
                         the deed delivered to the buyer, and the purchase price
                         delivered to the seller; and

                    2.   The seller reserves the right to sell the property at
                         any time to Prudential Relocation, a Division of
                         Prudential Residential Services, Limited Partnership or
                         _________________________ [Name of any other party to
                         be covered by this exclusion clause] (individually and
                         collectively a "Named Prospective Purchaser") to either
                         pay a commission or to continue this listing."

                    While marketing the home, the Prudential counselor will work
                    with the employee to establish a guaranteed offer which is
                    based on the appraisal process. The employee will be able to
                    choose an appraiser and a broker from a list of independent
                    appraisers and brokers provided by the Prudential counselor
                    and approved by the company. To the extent the lower value
                    is within 5 percent of the higher, the two values will be
                    averaged to determine the guaranteed offer. If the two
                    values are not within a 5 percent spread, the employee will
                    be asked to choose a second appraiser from the approved
                    list. The two highest values will then be averaged to
                    determine the guaranteed offer. The employee will have 90
                    days from the day Prudential makes the guaranteed offer to
                    accept it.




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                    4.   AMENDED VALUE - If an acceptable offer is received, the
                         employee should contact the Prudential counselor
                         immediately. The employee should not orally accept an
                         offer, deposit, or sign any agreement until speaking
                         with the Prudential counselor. If the employee presents
                         an offer which is 97 percent of the Prudential
                         guaranteed offer, the company will ensure the
                         guaranteed offer will be realized. If an employee
                         receives a bona fide offer for more than the guaranteed
                         offer, the guaranteed offer will be amended to the
                         higher offer.

                    5.   HOME SALE BONUS - As an incentive to the transferring
                         employee, the company will pay a bonus based on 3
                         percent of the sale price of the home. The bonus will
                         not be grossed up for taxes and will be:

                         o    based on the sale price of the home 

                         o    paid if the sale is at least 97 percent of the
                              guaranteed offer 

                         o    a minimum of $2,000 

                         o    paid upon confirmation of legal closing and
                              funding

                         EXAMPLE # 1:

                         Pam finds a buyer who will pay less than the guaranteed
                         offer from the relocation service. She doesn't reject
                         the contract to hold out for the higher price and calls
                         her Prudential counselor to review the offer. She knows
                         that as long as the buyer's contract is 97 percent or
                         more of the relocation service's offer, she will still
                         receive the higher guaranteed offer. The company wants
                         the home to sell and encourages employees to bring all
                         reasonable offers to the relocation service.

                         Pam's guaranteed offer $100,000
                         Pam's buyer $97,000

                         Pam's equity will be based on the guaranteed $100,000
                         and will be eligible for a home sale bonus of $2,910
                         ($97,000 X 3%).

                         EXAMPLE # 2:

                         John finds a buyer who will pay more than the
                         guaranteed offer from the relocation service. He
                         doesn't reject the contract from Prudential, and he
                         calls his Prudential counselor to review the offer to
                         make sure it will net him more and then simply amends
                         the Prudential contract for the higher offer.

                         John's guaranteed offer $100,000
                         John's amended value    $102,000

                         John's equity will be based on the amended offer of
                         $102,000 and will be eligible for a home sale bonus of
                         $3,060 ($102,000 X 3%).




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                    6.   LOSS ON SALE - If the guaranteed offer or amended value
                         of the old home is less than the original price, the
                         company will offset the loss. To qualify, the employee
                         must participate in the Home Marketing Assistance
                         Program and market the home for at least 60 days. The
                         employee will receive 100 percent of the loss, grossed
                         up for taxes, which is calculated based on the
                         difference between the original purchase price (based
                         on closing statement) plus any eligible capital
                         improvements and the greater of the guaranteed offer or
                         amended value. If the employee built the home, an
                         itemized list of building expenses and receipts are
                         required to support original purchase price. The
                         employee should call the Prudential counselor with
                         questions regarding original purchase price and sale
                         price definitions.

                    7.   SELLING ON YOUR OWN - If an employee decides to sell
                         the home without the help of the relocation company,
                         for a period of not more than one year from the date of
                         transfer, the company will authorize payment of various
                         fees and charges involved in the sale of the employee's
                         residence. These expenses may vary by state. Therefore,
                         before executing an agreement, the employee should
                         contact the Prudential counselor to ensure that these
                         costs will be covered. Such expenses may include:

                         o    attorney's fees, escrow services charges 

                         o    revenue stamps 

                         o    transfer taxes 

                         o    settlement, recording and processing fees 

                         o    sale commission if paid to a licensed real estate
                              broker and limited to the prevailing normal rate
                              in the area 

                         o    mortgage prepayment penalty in accordance with the
                              terms of the mortgage 

                         o    prepayment penalty on existing primary or
                              secondary loan upon proper verification from the
                              institution.

                         The company will not reimburse for mortgage discount
                         points or other closing costs which are agreed to be
                         paid on behalf of the purchaser.

                         Costs associated with selling expenses and reimbursed
                         outside the relocation company are not grossed up for
                         taxes.


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         E.    PURCHASE OF NEW RESIDENCE

               1.   The Prudential counselor will coordinate the assistance
                    required for the employee to purchase his/her new residence.
                    It is important that the employee seek assistance from the
                    Prudential counselor before executing any agreement to
                    purchase a new home.

               2.   The company will reimburse for various fees and charges
                    which the employee is required by law or local practice to
                    pay in connection with the purchase of a home at the new
                    location. This amount will be grossed up for taxes. The
                    provision will be applicable for a period of not more than
                    one year from the date of transfer. The employee must check
                    with the Prudential counselor for verification of allowable
                    reimbursements. Such expenses may include:

                    o    attorney's fees, escrow service charge 

                    o    up to 2 percent discount points including loan
                         origination fee 

                    o    recording fees 

                    o    title insurance policy/binder 

                    o    transfer taxes 

                    o    credit report 

                    o    fees for home appraisals if required by the lending
                         institution before a mortgage loan will be approved.

                    o    inspection fees (termite, structural) when normal,
                         customary or required by the lender

               3.   Equity Loan - Prudential will provide an equity loan for the
                    purpose of purchasing a home at the new work location. In
                    order to receive an equity loan, a copy of a fully executed
                    purchase agreement or binder for the new residence must be
                    submitted before any money is advanced. The loan will not be
                    for more than 120 days, and the interest on the loan will be
                    paid by the company. The maximum loan amount may not exceed
                    90 percent of the equity in the old home as determined by
                    appraisals. The employee will be required to sign an equity
                    loan note, which will become due and payable at the time
                    full equity is disbursed and Prudential acquires the
                    employee's property.

         F.    MORTGAGE SUBSIDY

               In order to ease the burden which occurs in those cases in which
               the transferred employee has a home mortgage at the previous
               location at a lesser interest rate than he or she is able to
               obtain on a home mortgage at the new location, a mortgage subsidy
               may be available if the following qualifications are met:

               o    Old mortgage interest rate is at least 7 percent (if the old
                    rate is less than 7 percent, then 7 percent will be used).


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               o    New interest rate is at least 1 percent higher than the old.
                    New mortgage loan must be the same type as the old one
                    (i.e., if the old loan was a 30-year fixed rate, the new
                    loan must be a 30-year fixed rate).

               The amount of subsidy is based on the percentage difference
               between the old and the new mortgages according to the following
               schedule:

               o    1 percent difference = 1 point

               o    3 percent difference = 4 points 

               o    4 percent difference = 6 points 

               o    5 percent difference = 8 points 

               o    6 percent difference = 10 points

               Each point is equal to 1 percent of the mortgage.

               The subsidy is paid in one lump sum and is not grossed up for
               taxes. The Prudential counselor will advise the employee if
               he/she is eligible.

         G.    RENTAL OVERLAP AND LEASE CANCELLATION

               The company will reimburse rental overlap not to exceed one
               month's rent when an employee locates a rental home or apartment
               at the new location before being able to vacate the former
               residence. The company will reimburse the employee for the actual
               expense (grossed up for taxes) of a lease cancellation for up to
               two months' rent if required.

         H.    RENTAL ASSISTANCE

               The Prudential counselor will provide information on the local
               practice and procedures for renting a home in the destination
               area. The counselor will recommend a real estate broker or rental
               agency in the destination area to provide the employee with
               information packages on orientation tours of communities.
               Prudential will also work with the broker to guide the employee
               through the rental and lease execution process.

         I.    SPOUSE ASSISTANCE

               An employee's spouse may find it necessary to give up a job
               because of the relocation. There are often additional expenses
               associated with securing a position in the new location. The
               company will reimburse up to $1,000, not grossed up for taxes,
               for expenses associated with the spouse securing a position in
               the new location. This includes costs associated with such items
               as:


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               o    requirements for special certifications 

               o    specialized training 

               o    placement counseling

               The employee should ask the Prudential counselor to clarify the
               costs that qualify for reimbursement.

         J.    TAX ASSISTANCE

               Most of the money the company pays to an employee for relocation
               expenses is considered by the Internal Revenue Service (and many
               states) as income and is therefore taxable. The company will
               assist the employee by paying the tax (i.e., provide extra
               income, also referred to as "gross-up") on most expenses
               considered non-deductible which cause the employee tax liability.

               The following information lists those items that are grossed up
               and those items that are not grossed up for federal and FICA tax
               purposes. Gross-up for state and local taxes will depend on the
               various state and local laws.

               Items grossed up include:

               o    incidental allowance 

               o    homefinding allowance 

               o    temporary living allowance 

               o    loss protection 

               o    lease cancellation 

               o    mobile home lump sum payment 

               o    closing costs at new location 

               o    meals for final move to new location 

               o    mileage that is not deductible 

               o    storage over 30 days and up to 60 days

               Items not grossed up include:

               o    mortgage subsidy 

               o    spousal assistance 

               o    home sale bonus 

               o    reimbursed costs (associated with selling expenses and
                    reimbursed outside the relocation company) for self closing

               o    lump sum for self move 

               o    household goods shipment - excluded from income

               o    transportation to new location (except meals) - excluded
                    from income 

               o    mileage that is deductible - excluded from income

               o    storage less than 30 days - excluded from income




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               Discount points on new home purchase will be tax assisted at time
               of payment, subject to year-end tax reconciliation.

               Tax assistance includes federal, state, local and FICA (Medicare
               and social security) and is based on the transferred employee's
               total compensation from company sources only. Other sources of
               income, including spouse's income, will not be included in this
               process. Year-end tax reconciliation is performed and, therefore,
               may possibly cause adjustments to be made to employee's income
               and/or taxes at the end of the year.

               If the employee has any questions concerning taxes, he/she should
               seek professional income tax accountant/consultant guidance.

         K.    PURCHASE OF HOUSTON RESIDENCE

               The company will agree to purchase the home acquired by an
               employee in connection with the transfer to Houston for an amount
               equal to the greater of (1) the appraised value (as determined
               under paragraph D.3 regarding "guaranteed offer"), or (2) the
               amount of the employee's investment (plus a tax gross-up for
               applicable taxes that may be due on the difference between the
               market value and the investment) (as determined under paragraph
               D.6 regarding "loss on sale"). The company's obligation to
               purchase a residence under this provision applies if (a) the
               employee is transferred by the company, (b) there is a change of
               control of El Paso Energy Corporation, or (3) the employee dies,
               retires or becomes permanently disabled. This benefit applies
               only to executive officers at grade level D or higher.

     Major deviations from policy require approval by the senior functional
     officer of Human Resources and Administration of El Paso Energy
     Corporation.

     This practice does not constitute nor imply a contract between the company
     and its employees or their dependents. It has been voluntarily adopted for
     the sole and exclusive use of the company and may be amended or withdrawn
     at any time without prior notice.





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